DOJ Pursues Organizations That Falsely Claim Compliance with Medicare’s EHR Incentive Programs

Clinical laboratories that interface with hospital EHR systems under scrutiny by the DOJ could be drawn into the investigations

Officials at the federal US Department of Justice (DOJ) continue to pursue fraud cases involving health systems that allegedly have falsely attested to complying with the Medicare and Medicaid electronic health record (EHR) adoption incentive programs (now known as the Promoting Interoperability Programs).

This is important for clinical laboratory leaders to watch, because medical labs often interface with hospital EHRs to exchange vital patient data, a key component of complying with Medicare’s EHR incentive programs. If claims of interoperability are shown to be false, could labs engaged with those hospital systems under scrutiny be drawn into the DOJ’s investigations?

Violating the False Claims Act

In May, Coffey Health System (CHS), which includes Coffey County Hospital, a 25-bed critical access hospital located in Burlington, Kan., agreed to pay the US government a total of $250,000 to settle a claim that it violated the False Claims Act.

CHS’ former CIO filed the qui tam (aka, whistleblower) lawsuit, which allows individuals to sue on behalf of the government and share in monetary recovery. He alleged that CHS provided false information to the government about being in compliance with security standards to receive incentive payments under the EHR Incentive Program.

According to a DOJ press release, “the United States alleged that Coffey Health System falsely attested that it conducted and/or reviewed security risk analyses in accordance with requirements under a federal incentive program for the reporting periods of 2012 and 2013. The government contended that the hospital submitted false claims to the Medicare and Medicaid Programs pursuant the Electronic Health Records (EHR) Incentive Program.”

“Medicare and Medicaid beneficiaries expect that providers ensure the accuracy and security of their electronic health records,” said Stephen McAllister (above), United States Attorney for the District of Kansas, in the DOJ press release. “This office remains committed to protecting the federal health programs and to hold accountable those whose conduct results in improper payments.” (Photo copyright: US Department of Justice.)

How Providers Receive EHR Incentive Program Funds

The original EHR Adoption Incentive Program was part of the Health Information Technology for Economic and Clinical Health (HITECH) Act. The federal government enacted the program as part of the American Recovery and Reinvestment Act of 2009 (the Recovery Act), which was an amendment to the Health Insurance Portability and Accountability Act (HIPAA). 

The Recovery Act allocated $25 billion to incentivize healthcare professionals and facilities to adopt and demonstrate meaningful use (MU) of electronic health records by January 1, 2014. The federal Centers for Medicare and Medicaid Services (CMS) released the incentive funds when providers attested to accomplishing specific goals set by the program.

The website of the Office of the National Coordinator for Health Information Technology (ONC),, defines “meaningful use” as the use of digital medical and health records to:

  • Improve quality, safety, efficiency, and reduce health disparities;
  • Engage patients and their families;
  • Improve care coordination and population and public health; and
  • Maintain privacy and security of patient health information.

The purpose of the HITECH Act was to address privacy and security concerns linked to electronic storage and transference of protected health information (PHI). HITECH encourages healthcare organizations to update their health records and record systems, and it offers financial incentives to institutions that are in compliance with the requirements of the program.

When eligible professionals or eligible hospitals attest to being in compliance with Medicare’s EHR incentive program requirements, they can file claims for federal funds, which are paid and audited by the Department of Health and Human Services (HHS) through Medicare and Medicaid.

Institutions receiving funds must demonstrate meaningful use of EHR records or risk potential penalties, including the delay or cancellation of future payments and full reimbursement of payments already received. In addition, false statements submitted in filed documents are subject to criminal laws and civil penalties at both the state and federal levels.

EHR Developers Under Scrutiny by DOJ

EHR vendors also have been investigated and ordered to make restitutions by the DOJ. 

In February, Greenway Health, a Tampa-based EHR developer, agree to pay $57.25 million to resolve allegations related to the False Claims Act. In this case, the government contended that Greenway obtained certification for its “Prime Suite” EHR even though the technology did not meet the requirements for meaningful use.

And EHR vendor eClinicalWorks paid the government $155 million to settle allegations under the False Claims Act. The government maintained that eClinicalWorks misrepresented the capabilities of their software and provided $392,000 in kickbacks to customers who promoted its product. 

Legal cases such as these demonstrate that the DOJ will pursue both vendors and healthcare organizations that misrepresent their products or falsely attest to interoperability under the terms laid out by Medicare’s EHR Incentive Program.

Clinical laboratory leaders and pathology groups should carefully study these cases. This knowledge may be helpful when they are asked to create and maintain interfaces to exchange patient data with client EHRs.

—JP Schlingman

Related Information:

DOJ Pursues More Electronic Health Records Cases

Electronic Health Records Vendor to Pay $57.25 Million to Settle False Claims Act Allegations  

Electronic Health Records Vendor to Pay $155 Million to Settle False Claims Act Allegations

Kansas Hospital Agrees to Pay $250,000 to Settle False Claims Act Allegations

EHR Sales Reached $31.5 Billion in 2018 Despite Concerns over Usability, Interoperability, and Ties to Medical Errors

Even Higher-Income Americans are Frustrated with High Health Insurance Costs; Many Drop Coverage and Switch to Concierge Care; Clinical Laboratories May Be Affected by Trend

From reduced medical laboratory test ordering to dealing with high-deductible health plans (HDHPs), clinical laboratories and anatomic pathology groups are impacted daily by rising healthcare costs. Until now, however, one demographic was not affected—affluent Americans. But that is no longer the case.

According to Bloomberg, thousands of people—some earning more than $125,000 a year—are now foregoing health insurance altogether and instead choosing concierge medicine because it costs less.

“We’re not poor people, but we can’t afford health insurance,” Mimi Owens, a resident of Harahan, La., told Bloomberg.

Priced Out of the Market

Bloomberg also reported on a Marion, N. C., family whose monthly insurance premium of $1,691 in 2017—triple their house mortgage payment—was increasing to $1,813 in 2018. The couple, who had no children and an income of $127,000 from a small IT business plus a physical therapy job, had a $5,000 deductible. However, their total annual insurance investment after premiums was about $30,000, and that was before any healthcare claims.

They decided, instead, to purchase care through a membership in a physician practice.

“Self-employed people are being priced out of the market,” Donna Harper, an insurance agent in Crystal Lake, Ill., told Fierce Healthcare. The self-employed business owner reportedly had to cancel her Blue Cross Blue Shield (BCBS) plan because the premiums totaled $11,000 annually with a $6,000 per year deductible.

“I haven’t been in the hospital for 40 years, so I’m going to roll the dice,” she stated.

Increasingly, this is the choice many people with higher incomes are making and it is impacting both the healthcare and health plan industries.

Huge Deductibles, Skyrocketing Premiums!

Regardless of whether people purchase their health coverage through the Affordable Care Act (ACA) Health Exchanges or their employers, deductibles can be as high as $5,000/year for individuals and $10,000/year for family coverage, or more.

And, in 2017, annual premiums for workers averaged $18,764, a Kaiser Employer Survey reported.

According to CNN Money, ACA premiums for silver plans in 2018 were 37% higher than the previous year, and the average increase for all health exchange plans since 2017 was 24% nationwide.

And, while financial assistance is available, people making more than 400% over the Federal Poverty Level will not qualify for premium subsidies from the ACA, according to

Lots of “Essential” Services, But Narrow Networks

Critics of the ACA point out that one of the reasons Health Exchange plans are so expensive is because every plan is required to have “essential health benefits” that many enrollees to not need or want. For example, a childless couple in their 50s has to pay for an ACA plan that includes services such as maternity, newborn, and pediatric care.

Another cause for sky rocketing costs are the ACA’s limited number of health plans in many regions. In fact, according to Bloomberg, half of the counties in the US—which together cover 30% of all Americans—have just one insurance company available to the Health Exchange customers.

Uninsured Rate Edges Up in 2017

So, it may come as no surprise that after declining over recent years, the uninsured rate noted at 2017 year-end actually increased by 1.3%, which translates to 3.2-million Americans, a Gallup and Sharecare analysis found (see image below).

That report attributes the uptick in the uninsured population, the largest since ACA’s start, to:

  • Health insurance companies pulling out of the ACA exchanges;
  • Costs for remaining insurance plans too high for consumers to bear; and,
  • Those Americans who earn too much for federal subsidies opting to go without health insurance.

Concierge Care Instead of Health Insurance

Many people do not have health insurance, but that does not mean they are without healthcare. For example, the N.C. couple named in the Bloomberg article decided to pay $198 a month (instead of the $1,813 annual premium) for private membership (AKA, concierge care) in a doctor’s office practice. The fee gives them unlimited office visits, discounts on prescription drugs, and lab tests.

The Detroit News, in its report on the launch of University of Michigan Medicine’s Victors Care in April, called membership-based practice programs a “revolutionary shift in medicine.” Victors Care plans, which start at $225 a month, reportedly give people unlimited office visits. (See Dark Daily, “Some Hospitals Launch Concierge Care Clinics to Raise Revenue, Generating both Controversy and Opportunity for Medical Laboratories,” April 23, 2018.)

And HealthLeaders Media noted that about 34% of medical practices surveyed indicated that within three years they may add a membership-based payment model.


Dr. James Mumper, MD (left), founder and chief medical officer of PartnerMD, a concierge care practice in Richmond, Va., treats Howard Cobb (right), who has been Mumper’s patient for 14 years. (Photo copyright: Richmond Magazine/Jay Paul.)

For the doctor’s part, concierge medicine has appeal. Physician want to spend more time with their patients and have fewer patients, noted the Richmond Times-Dispatch.

“So much of being a good primary care physician is listening and having time to listen,” stated Jim Mumper, MD, Chief Medical Officer, PartnerMD, a concierge medical practice he helped start in Richmond, Va. “This model allows the physicians to do the things that cause them to want to go to medical school and do all the training and all the sleepless nights—to feel at the end of the day that they’ve really helped a lot of people.”

Clearly, the healthcare and health insurance industries are under enormous pressure to address rising costs and evolve to better business models. Clinical laboratories are necessarily along for that ride, and in many ways, must be ready to react quickly to changes coming from both marketplaces.

 —Donna Marie Pocius

Related Information:

Why Some Americans are Risking It and Skipping Health Insurance

Plans with More Restrictive Networks Comprise 73% of Exchange Market

Millions More Americans Were Uninsured in 2017

2017 Employer Health Benefits Survey

Premiums for the Benchmark Silver Obamacare Plan Will Soar 37%, on Average, for 2018, According to Federal Data

US Uninsured Rate at 12.2% in Fourth Quarter 2017

University of Michigan Fuels Debate on Retainer-Based Health Care

34% of Medical Practice Models Considering Membership Practice Models

A Different Kind of Practice

Back to the Future of Healthcare with A Higher Price Tag: Concierge Medicine Offers Patients Unique Care

Some Hospitals Launch Concierge Care Clinics to Raise Revenue, Generating both Controversy and Opportunity for Medical Laboratories

KFF Study Finds HDHPs and Increased Cost-Sharing Requirements for Medical Services are Making Healthcare Increasingly Inaccessible to Consumers

Though ACA reforms may have slowed healthcare spending, rapidly increasing deductibles and cost sharing requirements have many experts questioning if patients can afford care at all, despite the increased availability of insurance coverage

Much of the debate surrounding efforts to replace and repeal the Affordable Care Act (ACA) has centered on premiums as a central facet of out-of-pocket spending. However, new data from a Kaiser Family Foundation (KFF) survey reveals that premiums are only one factor affecting consumers’ ability to pay healthcare bills. High-deductible health plans (HDHPs) are another culprit. This directly impacts clinical laboratories and anatomic pathology groups that find revenues down as more American’s avoid costs by delaying or opting out of testing and treatments.

The KFF report highlights both the complexity of managing healthcare costs and how the current focus on premium prices might miss other important considerations that make healthcare inaccessible to many Americans.

High Deductibles and Consumers’ Lack of Savings

An increasing number of insurance plans now include high deductibles—particularly in the individual markets, though employer-based insurance plans are experiencing steady increases as well.

This leaves consumers facing larger bills and making tough decisions about whether their healthcare is affordable—even with insurance.

When healthcare consumers cannot afford the out-of-pocket costs of healthcare, they are less likely to schedule wellness visits, adhere to treatments, or follow through on physician-ordered clinical laboratory tests they don’t consider essential to their well-being or simply cannot afford.

Even when they follow protocols and recommendations, that does not mean patients will be able to pay medical laboratories for tests performed, or anatomic pathology groups for specialized services, when the bill comes due.

The Ever-Growing Deductible Dilemma

In its 2017 study, “Do Health Plan Enrollees have Enough Money to Pay Cost Sharing?,” the KFF compares median data on liquid assets from 6,254 single and multi-person households—spanning a range of incomes and age brackets—to the average cost of both standard employer-based insurance and individual market insurance deductibles.

They further note that their data modeling and estimates present a “conservative estimate,” because chronic conditions might cause an extended period of out-of-pocket spending, and that median assets might not be available at a single time or throughout the year.

Concerning a previous 2016 KFF study on high-deductible insurance plans, the authors noted in a press release, “In 2016, 83% of covered workers face a deductible for single coverage, which averages $1,478. That’s up $159 or 12% from 2015, and $486 or 49% since 2011. The average deductible for workers who face one is higher for workers in small firms (three to 199 employers) than in large firms ($2,069 vs. $1,238).”

In the press release following KFF’s 2016 survey, Drew Altman, CEO (above), Kaiser Family Foundation, noted, “We’re seeing premiums rising at historically slow rates, which helps workers and employers alike, but it’s made possible in part by the more rapid rise in the deductibles workers must pay.” (Image copyright: Kaiser Family Foundation.)

In their latest look at deductibles and out-of-pocket spending, the KFF study authors note, “About half (53%) of single-person non-elderly households could pay the $2,000 from their liquid assets towards cost sharing, and only 37% could pay $6,000, which … was less than the maximum out-of-pocket limit for single coverage in 2016. For multi-person families, 47% could pay $4,000 from their liquid assets for cost sharing, while only 35% could pay $12,000.”

This sets the stage for the grim picture now facing many Americans. Despite increased access to medical insurance, being able to use the insurance to obtain care can be a struggle for a sizeable part of the lower to middle class population.

Creating a More Affordable Future for Healthcare

Data from the Q1 National Health Interview Survey (NHIS) conducted by the Centers for Disease Control and Prevention (CDC) show that growth in high-deductible plans might skew these numbers further still. They found that the number of persons under the age of 65 enrolled in HDHPs increased from 25.3% in 2010 to 40.0% in the first quarter of 2016 despite uninsured rates dropping from 22.3% to 11.9% over the same period.

In the 2017 study, KFF outlines the complexity of the issue: “There are significant differences across the income spectrum … For example, 63% of multi-person households with incomes of 400% of poverty or more could pay $12,000 from liquid assets for cost sharing, compared with only 18% of households with incomes between 150% and 400% of poverty, and 4% of households with incomes below 150% of poverty.”

While there are no simple answers to address today’s increasing deductibles, KFF emphasizes the importance of looking at the bigger picture.

“Much of the discussion around affordability has centered on premium costs. A broader notion of affordability will have to focus on the ability of families,” they note. “To adequately address the issue of affordability of health insurance, reform proposals should be evaluated on the affordability of out-of-pocket costs, especially for low and moderate-income families, and be sensitive to the financial impacts that high cost sharing will have on financial wellbeing.”

In the meantime, lack of access to preventative care and regular checkups can increase long-term healthcare costs and health risks, creating a spiral of financial concerns for patients as well as the healthcare professionals and the clinical laboratories serving them.

—Jon Stone

Related Information:

The Biggest Health Issue We Aren’t Debating

Do Health Plan Enrollees Have Enough Money to Pay Cost Sharing?

Average Annual Workplace Family Health Premiums Rise Modest 3% to $18,142 in 2016; More Workers Enroll in High-Deductible Plans with Savings Option Over Past Two Years

Americans Are Facing Rising Out-of-Pocket Healthcare Costs—Here’s Why

Americans’ Out-of-Pocket Healthcare Costs Are Skyrocketing

Americans Are Shouldering More and More of Their Healthcare Costs

Medicare Out-of-Pocket Costs Seen Rising to Half of Senior Income

Consumer Reaction to High-Deductible Health Plans and Rising Out-of-Pocket Costs Continues to Impact Physicians and Clinical Laboratories

Because of Sizeable Deductibles, More Patients Owe More Money to Clinical Pathology Laboratories, Spurring Labs to Get Smarter about Collecting from Patients

Growth in High Deductible Health Plans Cause Savvy Clinical Labs and Pathology Groups to Collect Full Payment at Time of Service


Are Payers Ganging up on Clinical Laboratories and Pathology Groups? Is this a Trend or Simply a Sign of Tougher Financial Times?

Medical laboratories today struggle to submit clean claims and be promptly and adequately reimbursed as health insurers institute burdensome requirements and audit more labs

Across the nation, clinical laboratories and anatomic pathology groups of all sizes struggle to get payment for lab test claims. Veteran lab executives say they cannot remember any time in the past when medical laboratories were challenged on the front-end with getting lab test claims paid while also dealing on the back-end with ever-tougher audits and unprecedented recoupment demands.

These issues center upon the new policies adopted by the Medicare program and private health insurers that make it more difficult for many clinical laboratories to be in-network providers, to obtain favorable coverage guidelines for their tests, and to have the documentation requested when auditors show up to inspect lab test claims. This is true whether the audit is conducted by a Medicare Recovery Audit Contractor (RAC) or a team from a private health insurer.

Source of Financial Pressure on Medical Laboratories in US

Another source of financial pressure on medical laboratories in the United States today is the ongoing increase in the number of patients who have high-deductible health plans—whether from their employer or from the Affordable Care Act’s Health Insurance Marketplace (AKA, health exchanges). The individual and family annual deductibles for these plans typically start at around $5,000 and go to $10,000 or more. Many labs are experiencing big increases in patient bad debt because they don’t have the capability to collect payment from patients when they show up in patient service centers (PSCs) to provide specimens.

Some of these developments make it timely to ask the question: Is it a trend for payers to gang up on clinical laboratories and pathology groups and make it tougher for them to be paid for the lab tests they perform? Multiple factors can be identified to support this thesis.

“Is it a coincidence that, in recent years, so many payers are initiating numerous requirements that add complexity to how labs submit claims for lab tests and how they get paid?” asked Richard Faherty of RLF Consulting LLC. Faherty was formerly Executive Vice President, Administration, with BioReference Laboratories, Inc. “I can track four distinct developments that, collectively, mean that fewer lab claims get paid, expose clinical laboratories to extremely rigorous audits with larger recoupment demands, and heighten the risk of fraud and abuse allegations due to use of contract or third-party sales and marketing representatives who represent independent medical lab companies.”

Faherty described the first of his four developments as prior-authorization requirements for molecular and genetic tests. “Health insurers are reacting to the explosion in molecular and genetic testing—both in the number of unique assays that a doctor can order and the volume of orders for these often-expensive tests—by establishing stringent prior-authorization requirements,” he noted.

More Prior-Authorization Requirements for Molecular, Genetic Tests

“At the moment, many clinical lab companies and pathology groups are attempting to understand the prior-authorization programs established by Anthem (which became effective on July 1) and UnitedHealthcare (which became effective on November 1),” explained Faherty. “Just these two prior-authorization programs now cover as many as 80 million beneficiaries. There are plenty of complaints from physicians and lab companies because the systems payers require them to use are not well-designed and quite time-consuming.

“One consequence is that many lab executives complain that they are not getting paid for genetic tests because their client physicians are unable to get the necessary prior authorization—yet the lab decides to perform the test to support good patient care even though it knows it won’t be paid.”

Richard Faherty (left), CEO, RLF Consulting LLC, and formerly with Bio-Reference Laboratories, Inc., will moderate this critical webinar. Joining him will be Rina Wolf (center), Vice President, Commercialization Strategies, Consulting and Industry Affairs, XIFIN, Inc., and Karen S. Lovitch (right), JD, Practice Leader, Health Law Practice, Mintz Levin, PC, Washington, DC. The webinar takes place Wednesday, December 6, 2017, at 2 p.m. EST; 1 p.m. CST; 12 p.m. MST; 11 a.m. PST. Click here to register. (Photo copyright: Dark Intelligence Group.)

Payers Checking on How Clinical Laboratories Bill, Collect from Patients

Faherty’s second trend involves how medical lab companies are billing and collecting the amounts due from patients. “Most payers now pay close attention to how clinical laboratories bill patients for co-pays, deductibles, and other out-of-pocket amounts that are required by the patients’ health plans,” he commented. “Labs struggle with this for two reasons.

“One reason is the fact that tens of millions of Americans currently have high-deductible health insurance plans,” said Faherty. “In these cases, medical laboratories often must collect 100% of the cost of lab testing directly from the patients. The second reason is the failure of many independent lab companies to properly and diligently balance-bill their patients. This puts these labs at risk of multiple fraud and abuse issues.”

Many Medical Lab Companies Undergoing More Rigorous Audits by Payers

Faherty considers trend number three to be payers’ expanding use of rigorous audits of lab test claims. “In the past, it was relatively uncommon for a clinical lab company or pathology group to undergo audits of their lab test claims,” he observed. “That has changed in a dramatic way. Today, the Medicare program has increased the number of private auditors that visit labs to inspect lab test claims. At the same time, private health insurers are ramping up the number and intensity of the audits they conduct of lab test claims and substantially increasing their demands for recoupment without audit.

“One consequence of these audits is that medical laboratories are being hit with substantial claims for recoupment,” noted Faherty. “I am aware of multiple genetic testing companies that have been hit with a Medicare recoupment amount equal to two or three years of the lab’s annual revenue. Some have filed bankruptcy because the appeals process can take three to four years.”

Are Contract Lab Sales Reps More Likely to Offer Physicians Inducements?

Faherty’s fourth significant trend involves the greater use of independent contractors that handle lab test sales and marketing for clinical lab companies. “This trend affects both labs that use third-party lab sales reps and labs that don’t,” he said. “Labs that use contract sales and marketing representatives do not have direct control over the sales practices of these contractors. There is ample evidence that some independent lab sales contractors are willing to pay inducements to physicians in exchange for their lab test referrals.

“This is a problem in two dimensions,” noted Faherty. “On one hand, clinical lab companies that use third-party sales contractors don’t have full control over the marketing practices of these sales representatives. Yet, if federal and state prosecutors can show violations of anti-kickback and self-referral laws, then the lab company is equally liable. In certain cases, government attorneys have even gone after executives on a personal basis.

“On the other hand, I am hearing lab executives complain now that a substantial number of office-based physicians are so used to various forms of inducement offered by third-party sales representatives that the lab’s in-house sales force cannot convince those physicians to use their lab company without a comparable inducement. If true, this is a fundamental shift in the competitive market for lab testing services and it puts labs unwilling to pay similar inducements to physicians at a disadvantage.”

These four trends describe the challenges faced by every clinical laboratory, hospital laboratory outreach program, and pathology group when attempting to provide lab testing services to office-based physicians in a fully-compliant manner and be paid adequately and on time by health insurers.

Why Some Labs Continue to Be Successful and What They Can Teach You

These four trends may also explain why many medical lab companies are dealing with falling revenue and encountering financial difficulty. However, there continue to be independent lab companies that have consistent success with their coding, billing, and collections effort. These labs put extra effort into aligning their business practices with the requirements of the Medicare program and private health insurers.

To help pathologists and managers running clinical laboratory companies, hospital lab outreach programs, and pathology groups improve collected revenue from lab test claims and to improve lab compliance, Pathology Webinars, LLC, is presenting a timely webinar, titled, “How to Prepare Your Lab for 2018: Essential Insights into New Payer Challenges with Lab Audits, Patient Billing, Out-of-Network Claims, and Heightened Scrutiny of Lab Sales Practices.” It takes place on Wednesday, December 6, 2017 at 2:00 PM EDT.

Three esteemed experts in the field will provide you with the inside scoop on the best responses and actions your clinical lab and pathology group can take to address these major changes and unwelcome developments. Presenting will be:

·       Rina Wolf, Vice President, Commercialization Strategies, Consulting and Industry Affairs, XIFIN, Inc. in San Diego; and,

·       Karen S. Lovitch, JD, Practice Leader, Health Law Practice, Mintz Levin, PC, in Washington, DC;

·       Moderating will be Richard Faherty of RLF Consulting LLC, and formerly with Bio-Reference Laboratories, Inc.

Special Webinar with Insights on How Your Lab Can Collect the Money It’s Due

To register for the webinar and see details about the topics to be discussed, use this link (or copy and paste this URL into your browser:

This is an essential webinar for any pathologist or lab manager wanting to improve collected revenue from lab test claims and to improve lab compliance. During the webinar, any single idea or action your lab can take away could result in increasing collected revenue by tens of thousands even hundreds of thousands of dollars. That makes this webinar the smartest investment you can make for your lab’s legal and billing/collection teams.

—Michael McBride

Related Information:

How to Prepare Your Lab for 2018: Essential Insights into New Payer Challenges with Lab Audits, Patient Billing, Out-of-Network Claims, and Heightened Scrutiny of Lab Sales Practices

Risk, Compliance, Pay—A Juggling Act for Labs

Continued ‘Aggressive Audit Tactics’ by Private Payers and Government Regulators Following 2018 Medicare Part B Price Cuts Will Strain Profitability of Clinical Laboratories, Pathology Groups

Threats to Profitability Causing Clinical Laboratories, Pathology Groups to Take on Added Risk by Entering into ‘Problematic’ Business Relationships and Risky Pricing Plans

Payers Hit Medical Laboratories with More and Tougher Audits: Why Even Highly-Compliant Clinical Labs and Pathology Groups Are at Risk of Unexpected Recoupment Demands

‘Death by 1,000 Knives’ Could Be in Store for Clinical Laboratories, Pathology Groups Not Prepared to Comply with New Medicare Part B Regulations

Hospitals, Pathology Groups, Clinical Labs Struggling to Collect Payments from Patients with High-Deductible Health Plans

Challenges getting paid likely to continue as high deductibles make patients responsible for paying much more of their healthcare bills

Rising out-of-pocket costs for healthcare consumers is translating into increasing amounts of red ink for hospitals and healthcare providers struggling to collect bills from patients with high-deductible health plans (HDHPs). Clinical laboratories and pathology groups are unlikely to be immune from these challenges, as increasing numbers of patients with smaller healthcare debts also are failing to pay their bills in full.

That’s according to a recent TransUnion Healthcare analysis of patient data from across the country. It revealed that 99% of hospital bills of $3,000 or more were not paid in full by the end 2016. For bills under $500, more than two-thirds of patients (68%) didn’t pay the full balance by year’s end (an increase from 53% in 2015 and 49% in 2014). The study also revealed that the percentage of patients that have made partial payments toward their hospital bills has fallen dramatically from nearly 90% in 2015 to 77% in 2016.

Increased Patient Responsibility Causing Decrease in Patient Payments

“The shift in healthcare payments has been taking place for well over a decade, but we are seeing more pronounced changes in how hospital bills are paid during just the last few years,” Jonathan Wilk, Principal for Healthcare Revenue Cycle Management at TransUnion (NYSE:TRU), said in a statement.

Millions of Americans are in high-deductible health plans. And, as the graphic above illustrates, that number has been increasing since the ACA was signed into law in 2010. (Graphic copyright: Reuters.)

While the Affordable Care Act (ACA) has increased the number of Americans receiving medical coverage through Medicaid or commercial insurance, TransUnion noted in its statement that hospitals still wrote off roughly $35.7 billion in bad debt in 2015. By 2020, TransUnion predicts that figure will continue to rise, with an estimated 95% of patients unable to pay their healthcare bills in full by the start of the next decade.

“Higher deductibles and the increase in patient responsibility are causing a decrease in patient payments to providers for patient care services rendered. While uncompensated care has declined, it appears to be primarily due to the increased number of individuals with Medicaid and commercial insurance coverage,” John Yount, Vice President for Healthcare Products at TransUnion, said in the TransUnion statement.

Collecting Patients’ Out-of-Pocket Costs Upfront

According to Reuters, hospitals in states that did not expand Medicaid under Obamacare have witnessed a more than 14% increase in unpaid bills as the number of people using health plans with high out-of-pocket costs increased. For hospitals in those states, HDHPs are impacting their bottom lines.

“It feels like a sucker punch,” declared Chief Executive Officer John Henderson of Childress Regional Medical Center, Texas Panhandle Region, in a Bloomberg Business article. “When someone has a really high deductible, effectively they’re still uninsured, and most people in Childress don’t have $5,000 lying around to pay their bills.”

A recent report from payment network InstaMed found that 72% of healthcare providers reported an increase in patient financial responsibility in 2016, a trend that coincides with a rise in the average deductible for a single worker to $1,478, more than double the $735 total in 2010.

In response to the increase in patient responsibility, hospitals and other providers are turning to new tactics for collecting money directly from patients, including estimating patients’ out-of-pocket payments and collecting those amounts upfront.

Hospital Systems Offer Patients Payment Options

Venanzio Arquilla is the Managing Director of the healthcare practice at The Claro Group, a financial management consultancy in Chicago. In an interview with Crain’s Chicago Business, he stated that hospitals are working overtime to get money from patients, particularly at the point of service.

“Hospitals have gotten much more aggressive in trying to collect at time of service, because their ability to collect on self-pay amounts decreases significantly when the patient leaves the building,” Arquilla noted. “You can’t say, ‘Give me your credit card’ to someone in the emergency room bleeding from a gunshot wound, but you can to someone going in for an elective procedure.”

Revenue loss due to unpaid medical bills among states that complied with Medicaid Expansion under the ACA has increase so dramatically, some hospitals are now offering patients prepayment discounts and no-interest loans to ensure payments. Clinical laboratories and anatomic pathology groups should develop strategies to respond to the increase collections from patients at the time of service. (Graphic copyright: Reuters.)

Richard Gundling, a Senior Vice President at the Healthcare Financial Management Association (HFMA), told Kaiser Health News that an estimated 75% of healthcare and hospital systems now ask for payment at the time services are provided. To soften the blow, some healthcare systems are providing patients with a range of payment options, from prepayment discounts to no-interest loans.

Novant Health, headquartered in North Carolina, is among those healthcare systems offering patients new payment strategies. Offering no interest loans to patients has enabled Novant to lower its patient default rate from 32% to 12%.

“To remain financially stable, we had to do something,” April York, Senior Director of Patient Finance at Novant Health, told Reuters. “Patients needed longer to pay. They needed a variety of options.”

Providers Must Adapt to New Patient Procedures

“Doctors need to understand the landscape has changed. A doctor’s primary concern use

to be whether a patient had insurance. Now, it’s the type of insurance,” Devon M. Herrick, PhD, a Senior Fellow at the National Center for Policy Analysis (NCPA) in Dallas, told Medical Economics.

While clinical laboratories and anatomic pathology groups traditionally have not collected money directly from patients, Herrick says healthcare providers must accept that the rules of the game have changed. “Patients are more cost-conscious now. That means patients will question their physicians about costs for procedures,” he adds.

Dark Daily has advised clinical laboratories in the past to develop tools and workflow processes for collecting payments upfront from patients with high-deductible health plans (See, “Growth in High Deductible Health Plans Cause Savvy Clinical Labs and Pathology Groups to Collect Full Payment at Time of Service,” Dark Daily, July 28, 2014). Not doing so can amount to millions of dollars in lost revenue to the medical laboratory industry.

—Andrea Downing Peck

Related Information:

Bad Debt Is the Pain Hospitals Can’t Heal as Patients Don’t Pay

Out of More Pockets

Patients May be the New Payers, But Two in Three Do Not Pay Their Hospital Bills in Full

Feel Like the Hospital Is Shaking You Down Over that Bill? It Probably Is

The Seventh Annual Trends in Healthcare Payments Report Is Here

Doctors and Hospitals Say, ‘Show Me the Money’ before Treating Patients

Ballooning Bills: More US Hospitals Pushing Patients to Pay before Care

Growth in High Deductible Health Plans Cause Savvy Clinical Labs and Pathology Groups to Collect Full Payment at Time of Service

Higher Annual Deductibles and Co-Payments Cause Hospitals to Intensify Efforts to Collect Directly from Patients; Medical Laboratories Now Feel Similar Financial Squeeze

Because of Sizeable Deductibles, More Patients Owe More Money to Clinical Pathology Laboratories, Spurring Labs to Get Smarter about Collecting from Patients